Americans Nearing Retirement Face a Growing Threat: Their Mortgage

NEW YORK (MainStreet)  Strapped by crushing credit card debt and massive student loans, Millennials and Gen X-ers struggle to afford suitable housing. While this is often cited as the plight of under-40 adults, Americans 65 and older are facing the same challenge  with little time to seek a solution.

The Consumer Financial Protection Bureau (CFPB) says that while older consumers have the highest homeownership rate among all age groups, they are facing greater mortgage debt, less affordable housing and a growing risk of foreclosure.

Based on data from the Census Bureau, the Federal Reserve and consumer complaints submitted to the CFPB, the study finds the percentage of adults 65 and older carrying mortgage debt increased from 22% to 30% from 2001 to 2011. Mortgage balances for the same period grew 82% -- from about $43,300 to $79,000. For senior Americans aged 75 and older, the mortgage debt rate more than doubled, from 8.4% to 21.2%.

"A home can be a place of security for older Americans in their retirement years  a roof over their heads as well as a valuable asset," said CFPB director Richard Cordray. "But as more seniors carry significant mortgages into retirement, they put themselves at risk of losing their nest eggs and their homes."

The CFPB says the problem can be traced back to the refinancing boom of the early 2000s, as well as a general trend to buy a first home later in life, financing with a smaller down payment and tapping home equity through loans and lines of credit.

"In general, older consumers are carrying more debt, including mortgage, credit card, and even student loan debt, into their retirement years than in previous decades," the report states. "Mortgage debt, the largest debt that older consumers carry, is the key driver of this trend. Today, compared to a decade ago, fewer older homeowners own their home outright. Rising mortgage debt is threatening the retirement security of millions of older Americans."

More than half of retired homeowners spend nearly one-third (30%) of their total income on housing related costs. Delinquencies and foreclosures among older Americans have increased five-fold since the financial crisis, according to the CFPB.

"Older consumers complain that their overall debt burden often led to their mortgage default," the report says. "Many talk about the challenge of living on a fixed or limited income due to unemployment, poor health, or the exhaustion of retirement savings."

Paying off a mortgage prior to retirement can make a huge difference in the financial security of older Americans. In 2011, older homeowners with a mortgage spent $800 more per month (a median of $1,257) on housing than seniors without a mortgage ($434).